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Hi Sir. I’m not able to work out test no 4. please help.
Glossop Limited reported an annual profit of $47,500 for the year ended 31 March 2000. The company uses
absorption costing. One product is manufactured, the Rover, which has the following standard cost per unit.
$
Direct material (2 kg at $5/kg) 10
Direct labour (4 hours at $6.50/hour) 26
Variable overheads (4 hours at $l /hour) 4
Fixed overheads (4 hours at $3/hour) 12
52
The normal level of activity is 10,000 units although actual production was 11,500 units. Fixed costs were as
budgeted.
Inventory levels at 1 April 1999 were 400 units and at the end of the year were 600 units.
What would be the profit under marginal costing?A $44,300
B $45,100
C $49,900
D $50,700You have asked this question also below the lecture and I have answered it there 🙂
Hello.
I have a question related to the above item.
I could get budgeted fixed OH which was $120,000 then I got absorbed OH as well which was $138,000.
Then, in order to get over/under absorption, we have to compare an Actual OH and Absorbed OH right? But my problem is that why do you consider the Budgeted Fixed OH cost as an Actual OH from this question??
Thank you.
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